Contents
Apple Inc. (AAPL) shares are down sharply Wednesday afternoon, and there are a few potential reasons why.
Checkout this video:
Reasons for the Drop
iPhone Sales
One of the primary reasons for the drop in Apple stock prices is due to slower than expected iPhone sales. In its second fiscal quarter of 2019, Apple sold 52.2 million iPhones, which was below the 54 to 57 million that analysts had been expecting. This marks a continued trend of declining iPhone sales, as Apple sold 77.3 million iPhones in the same quarter a year ago. While part of this can be attributed to the overall saturation of the smartphone market, it also appears that Apple is losing market share to rivals such as Samsung and Huawei.
Trade Tensions
The U.S. and China have been in a trade war for over a year, with each country imposing tariffs on the other’s goods. This has led to an increase in the price of goods for consumers and businesses, which has impacted spending and caused economic uncertainty. In May 2019, the trade war escalated when the U.S. increased tariffs on $200 billion worth of Chinese goods from 10% to 25%. China retaliated by increasing tariffs on $60 billion worth of U.S. goods. The increase in tariffs has led to a decrease in demand for both countries’ products, which has impacted global growth and caused stock prices to fall.
Macroeconomic Concerns
The drop in Apple’s stock may be due to macroeconomic concerns. The trade war between the United States and China has caused tariffs on Chinese goods, including many components used apple products to increase. This has led to higher prices apple products which has caused demand for them to fall. In addition, the Chinese economy has been slowing down, which has also led to lower demand for Apple products.
What Apple is Doing to Combat the Drop
Apple’s stock is down 3 percent today, and while that may not seem like much, it’s a significant drop for the company. So, what’s causing the decline? And what is Apple doing to combat it? Let’s take a look.
Diversifying Their Product Line
Apple is most well-known for their iPhones, but in recent years they have been working hard to expand their product offerings to include a wide range of other electronics. This has helped to offset some of the impact of the drop in iPhone sales. Some of their most popular new products include apple watch AirPods, and iPad. By diversifying their product line, Apple is better insulated from risks associated with any one particular product.
Focusing on Services
One reason forApple’s recent stock decline is the company’s heavy reliance on iPhone sales. In fact, the iPhone makes up more than 60 percent of Apple’s total revenue. So when iPhone start to drop, as they have in recent quarters, it drags down Apple’s stock price along with it.
But Apple is working to change that. The company is now focusing more on its services business, which includes things like the App Store, iCloud, apple music Services now make up almost 20 percent of Apple’s total revenue, and that number is growing every quarter.
By diversifying its revenue sources, Apple is trying to become less reliant on the iPhone. And that should help the company’s stock price stabilize in the long run.
Apple has been returning cash to shareholders through share repurchases and dividends for years. In the fourth quarter of Apple’s 2018 fiscal year, the company spent $14.5 billion on share repurchases and $3.7 billion on dividends. For 2019, Apple plans to spend $75 billion on share repurchases and expects to pay approximately $13 billion in dividends.
In May 2018, Apple increased its quarterly dividend by 16 percent and initiated a new $100 billion share repurchase program. The company had approximately $245 billion of cash and marketable securities on its balance sheet as of December 29, 2018, and intends to continue to utilize its strong financial position to return capital to shareholders through dividends and share repurchases.
What Does the Future Hold?
Apple Inc. (AAPL) shares are down 2.5% in premarket trading after the company announced its earnings results for the first quarter of its fiscal 2020 on Tuesday morning. This marks the second straight quarter of declining year-over-year revenue for the Cupertino, California-based tech giant.
5G Rollout
One reason for Apple’s recent stock decline is the disappointing rollout of its 5G technology. Initially, Apple was one of the leaders in 5G development and was expected to release the first 5G iPhone in 2020. However, production delays due to the coronavirus pandemic meant that the iPhone 12, which was released in October 2020, was only available with 4G technology. This gave Samsung and other Android manufacturers a significant advantage in the 5G market.
In addition, Apple’s 5G modem chips are supplied by Qualcomm, which has been embroiled in a legal dispute with Apple over patent royalties. This dispute has led to Qualcomm withholding supply of chips to Apple, further delaying the rollout of 5G iPhones.
Finally, Apple’s decision to not include a power adapter or earphones in the box with the iPhone 12 has also been criticised. This is seen as a way for Apple to cut costs and increase profits, rather than investing in new technology.
New Products in the Pipeline
Apple is facing some tough challenges, but it still has a lot of upside potential. Here’s a look at some of the new products that Apple is working on that could help it rebound in the coming years.
Apple Glasses
One of the most highly anticipated new products from Apple is its AR glasses. Rumors have been swirling for years about the glasses, which are said to be in development under the codename “Project Mirrorshades.” The glasses are expected to be powered by a new, energy-efficient display technology that Apple is said to be working on.
The glasses are said to be designed to resemble a regular pair of sunglasses, with a lightweight frame and no fans or other moving parts. They are expected to connect wirelessly to an iPhone or iPad and use its processing power to deliver AR experiences.
Apple is also rumored to be working on an AR headset that would be more powerful than the glasses and capable of delivering “immersive” AR experiences. The headset is said to be in early development and is not expected to launch until 2022 or 2023 at the earliest.
Apple Car
Another long-awaited product from Apple is its self-driving car. Rumors about an “Apple Car” have been circulating for years, and there have been multiple reports that the company is working on both an electric car and self-driving software.
The latest reports suggest that Apple has scaled back its plans for an electric car and is now focused on developing self-driving software that could be used by other automakers. The company is said to be working on a prototyped vehicle with sensing and computing technology that would enable it to drive itself without a human driver.
In addition to its own car project, Apple has also been working on self-driving technology with Volkswagen. The two companies are collaborating on a prototype vans equipped with autonomous driving tech that could be used for shuttle services or ride-hailing apps like Uber or Lyft.
Continued Diversification
Apple has always been a company that reinvents itself. It started as a computer company, then became a phone company, and is now turning into a luxury fashion brand. Apple is also expanding into new markets like cars and virtual reality. The stock market is worried that Apple is losing its focus on its core product, the iPhone.
Investors are also worried about Apple’s dependence on China. China is Apple’s biggest market, and sales there have been slowing down. Economic uncertainty in China could hurt Apple’s sales even more.
Apple is still a very profitable company, but its stock price has fallen because investors are worried about its future growth.
